Seeking to retain a $160 million small-business landlord services award from 2020 at the Department of Energy’s Paducah Site in Kentucky, an attorney for Swift & Staley told a federal appeals court Thursday the company never had a chance to explain why its minority role in a joint venture did not make it ineligible for the work.
Counsel Daniel Cook said Swift & Staley never had an opportunity, during discussions with a Small Business Administration area office, to make its case about whether its potential negative control of a joint venture with North Wind Group at DOE’s Portsmouth Site in Ohio meant that Swift & Staley was not as small enough.
Negative control refers to a shareholder’s ability to block action by a majority partner. Boycotting meetings or refusing to sign leases are examples of negative control.
Cook on Thursday also told a three-judge panel of the Court of Appeals for the Federal Circuit that a rival bidder for the Paducah work, Akima Intra-Data of Herndon, Va., never even broached the issue of negative control with the SBA — in fact, Cook said, Swift & Staley outed itself on that front.
“What difference does it make,” asked Circuit Judge Todd Hughes. “Are you saying that OHA [the Office of Hearings and Appeals at SBA] can’t look at the record?”
Justice Department attorney Evan Wisser said Thursday that no matter how SBA or anyone else found out about Swift & Staley’s minority stake in the Portsmouth contractor, they still found out and were still allowed to categorize Swift & Staley as other-than-small for the purposes of the Paducah award, which was set aside for small businesses.
The government has asked that the appeals court rule by March 31, when the latest extension of Swift & Staley’s existing landlord contract at Paducah will expire. The judges, who took the case under advisement, did not say when they might rule.
Swift & Staley, the incumbent Paducah landlord services provider since 2015, wound up on appeal after losing its case in the Court of Federal Claims this year and its hearing before the SBA in 2021. Upstart Akima protested the award to the SBA in 2020.
Swift & Staley actually won the first leg of its legal battle in the Court of Federal Claims in August 2021 when Judge Dietz said SBA regulations allow the company to exclude a proportionate share of receipts from the North Wind-led Portsmouth Mission Alliance because it is a populated joint venture. A populated joint venture uses its own employees to perform the contract work, rather than having the joint venture partners do the work.
But when Dietz remanded the matter back to SBA and the Office of Hearings and Appeals, the claims judge said other reasons for finding Swift & Staley too large might be discovered.
But in the second Dietz opinion, following the remand, the claims court judge sided with the Office of Hearings and Appeals and the SBA area office that Swift & Staley is affiliated with the joint venture through negative control. Dietz also rejected Swift & Staley’s argument that the negative control issue was not raised properly.
Both the trial court and the agency found that Swift & Staley’s negative control of the joint venture at Portsmouth swelled the company’s corporate ranks to the point where it was, as Akima claimed, ineligible for the follow-on Paducah landlord contract, which was set aside for small businesses.
The landlord contractor acts as something of a city manager for the former Paducah Gaseous Diffusion Plant complex. It ensures snow is plowed, potholes patched, gates guarded, bookkeeping gets done and information technology is provided for feds and nuclear cleanup contractors at the Kentucky site.
Paducah-based Swift & Staley, an employee-owned company, has provided site services at the DOE Paducah complex since October 2015. Thanks to various contract extensions during the administrative and legal proceedings, the existing contract won’t expire until March 31, 2023. The current business is now valued at up to $336 million.
A recording of the oral arguments can be heard here.
